SaaS Blogs

This is an interesting debate, especially if you look at the Corporate Mail Center software industry where I work. Almost every major player in this industry has a “dealer network” in place, regardless of the type of product sold or the technologies used. A handful are web-based products, and yet they still leverage a network of local resellers. This is still a high-touch market and it will be difficult to change that.

It will be almost impossible for existing companies to introduce a SaaS product that they could “distribute” directly to the customer, simply due to the VAR agreements they have in place. The company often can’t bypass the reseller due to contractual limitations. They might need to spin-off a company to do this, which creates other headaches.

For new companies in this space, you will have to work around that “legacy” mindset. This is still a very high-touch business and requires a great deal of relationship building. I can see, however, after this type of direct-to-consumer model gains traction in this industry, it will really take off and the dealer networks will go away; don’t hold your breath though, it will not be a quick transition.

It pains me to think about giving a cut to a local VAR who does nothing more than sell a USB key with a URL shortcut on it! Or, if they want an internally “hosted” app, the VAR could sell them an appliance that is nothing more than a pass-through gateway to the hosted app!

This is certainly an interesting topic, especially as SaaS applications make their way into niche verticals with a strong legacy install base

- Lincoln

Lincoln,

Thanks for the comment. I do agree that the transition will more than likely be at a snails pace (as far as the tech industry is concerned). Part of the equation will include natural employee replacement where new employees and new small business owners will be aware of this style of software distribution, and may initiate the hunt for a particular peice of software functionality on their own.

Hopefully, the notion of complex dealer networks do go away, but I actually I hope that it will be replaced by those that can add higher level value to the equation, such as delivering customizations for SaaS apps to the end users.

I think the ‘reach hurdle’ is definitely surmountable, it’ll just take some old fashioned thought and determination.

Channels will remain vital where they do more than just push product. In the on-premise ERP/CRM world we are already seeing many sales in which purchase deicisons are not driven by product. Customers are buying from the reseller who “gets” their industry and unique business processes. There are any number of Saas or on-premise products that can get the job done in the hands of resellers such as these. The vendors simply lack the capacity (and often the industry knowledge) to reach the volume of SMBs they are after.

Jason,

Point well taken with resellers filling the knowledge gap. They’ll undoubtedly play a critical role, particularly in using the fact that they “get” the customers industry and will use base on-demand offerings as a start for custom-fit SaaS solutions.

That said, do you think resellers have reach beyond the mid-market (say mom and pop shops - ‘the long tail’)? I know many small and micro-businesses who would benefit from SaaS offerings (since it makes software affordable) but hadn’t a clue what SaaS/On-Demand was. Furthermore, these same people had never heard of a VAR or a software reseller from the consultive standpoint, and the extent of their buying knowledge was ‘Software is sold at CompUSA’. I hate to abuse the long tail concept, but there really is a bevvy of businesses out there that haven’t experienced the power of good software functionality because it was out of financial and technical reach, but that now can.

As a note, I haven’t formalized research in this topic (i.e. what percentage of small/micro-business have no clue of what SaaS is and have no VAR relationships) and my comments are simply rooted in passing conversations with people.

[…] If you haven’t read it, I wrote a post the other day regarding traditional sales channels and SaaS end users, highlighting the potential need to reach these end users with creative partnerships. I used the NetSuite/CompUSA partnership as an example. I bumped into a post over on Phil Wainewrights blog this morning about NetSuite’s recent parternship with eBay. Personally, I like the proposition and really is a unique way to approach the reach problem through partnerships. This particular instance is a technical and business partnership. Phil discusses eBay’s business user base as a potential customer route for NetSuite, and I definitely agree. Furthermore, I think it exposes people to B2B on-demand software, which is always a plus. These icons link to social bookmarking sites where readers can share and discover new web pages. […]

That’s a fair point. There is a section of the market where the traditional VARs struggle to reach. With the staff they keep on hand for larger deals many find it difficult to build a viable business model around the smallest businesses. The cost of sales is just too high. That’s why there is so little overlap between say Intuit’s channel and Microsoft’s channel.

But interestingly, most of the talk and focus around Salesforce.com, NetSuite, etc is about larger businesses. In those markets they are head to head with the legacy on-premise vendors. That’s an intersting competitive battle and is causing the likes of SAP (A1S) and Microsoft (Dynamics Live) to dramatically shift gears (not sure if Sage has it in them). But it’s still about battling for a share of an existing pie.

The opportunity in “the long tail” of mom and pop shops remains untapped. Its a place where Saas players can make the pie bigger, and the traditional vendors can’t respond. They don’t know how to serve this market today. Companies like FreshBooks are doing really interesting things in this space.

But what do I know? I’m a one person LLC using Microsoft’s Office Accounting. By the way, isn’t Excel the #1 “accounting” app used by very small businesses?

Definitely, Excel is the #1 accounting app, but Microsoft has done a great job leveraging relationships with PC manufacturers like Dell and HP to push that product down the pipe; mom and pop shops do know Dell, and if Dell says “Would you like Microsoft Excel, it’ll help with your business” they answer yes. I suppose the Dell’s of the world act as a good VARish channel, no? I have never used FreshBooks, looks very cool. Reminds of BlinkSale. Does FreshBooks subscriber base consist mostly of tech-knowledgeable users (one person LLCs that know how to respond to comment on blogs) or do they have a base of general population 1 person businesses? I think there is a clear segmentation on that level; the people I’ve talked to might know how to browse the web through “their Yahoo” and thats about it.

I am not a techie. I am a merketer. So how to push SAAS into SMB layer is a realy interesting one to me. I think the neck of the funnel is narrowing and I must give salesforce the credit for occupying this space so well from a share of mind perspective that is way above their broader utility to business from a 360 view. nature abhors a vacuum and so this company has become the poster child for all things..many of which they do badly or not at all. But we are talking tail here and far as I last noticed the tail always followed the dog. This rapidly growing dog is not out of reach conceptually or pocket-wise to the average smb so they will be many an smb’s virginal expeience into SAAS. We use them and despite modest satisfaction I would consider an alternative in a heartbeat. I believe those altenatives will arise in years to come and just as EXCEL offered an easy Lotus 123 transistion, feisty CRM/SFA contenders will do the same too. The days of a 20 monopolistic dynasty like Microsoft historic tenure will not be repeated. The advantage of SAAS is also its weakness if you are a top dog. It’s going to be easier to switch than it is/was to break the chains of Office. You ain’t seen nothing yet.

Hey Sinclair,
I enjoyed your talk at the SaasCon. Thank you.
On-premise vendors would go into a company and sell their software, maybe even give a presentation and a traning session. Is this something that is viable when a company is selling a saas service at a fraction of the cost? How do you tell a prospect that “no, we are an online business and we donot offer personalized traning”?

Hi Sahil,

Thanks for attending SaaSCon. I think that selling training is still viable if you’re targetting the appropriate segment. Although SaaS has been hailed as the new way for small customers to access software funtionality, large customers are opening up to SaaS as well (check out deals like Salesforce.com’s Staples or Merril Lynch deal). The long tail of customers may not pay high personalized training fees and will resort to self help. However, the large customers are still very open to paying for training.

If you are strictly targetting smaller customers with your SaaS offering, then I believe it’s reasonable to say “Sorry, training is not part of our offering” However, the large customers may demand it.

[…] A few months back I wrote this post which discussed trying to get SaaS offerings into the hands of SMBs.  The question was a.) Would traditional channels (e.g. VARs, stores, etc.) play a role and b.) what new channels would develop to push SaaS out to the SMB. Well, a combination of some conversations with telcos as well as this article over at Tech Target helped highlight an answer to b.) […]